General Electric Co ( GE.N ) confirmed on Monday it was unloading the bulk of its transportation business which makes train engines to Wabtec Corp ( WAB.N ), a U.S. manufacturer of equipment for the rail industry, in a deal valued at about $11.1 billion.

The deal, flagged to Reuters by sources who asked not to be named on Sunday, is the biggest done by Chief Executive John Flannery since he announced a major overhaul of the U.S. industrial conglomerate late last year.

GE will receive a $2.9 billion up-front payment in cash and its shareholders will own 50.1 percent of the combined company, while Wabtec shareholders will own the rest, the companies said in a statement.

Wabtec chief executive Raymond T. Betler will remain president and CEO of the merged company while its Chairman, Albert J. Neupaver has been re-appointed executive chairman. GE Transportation Chief Executive Rafael Santana will become president and CEO of Wabtec’s Freight Segment.

The resulting company will have approximately $8 billion in revenues, the companies said. The transaction is expected to close in early 2019.

Shares in both companies rose in trading before the bell on Monday.

PARED BACK TO THE CORE

Flannery told GE shareholders late last year he plans to pare GE down to three core businesses: power, aviation and healthcare, a departure from the deal-driven empire building of his predecessors, Jeff Immelt and Jack Welch.

That should include GE getting rid of at least $20 billion of assets through sales, spin-offs or other means.

Based on Wabtec’s stock price on April 19, the last unaffected trading day prior to media speculation regarding a potential transaction, the value of the transaction is approximately $11.1 billion, the companies said.

When adjusted for the net tax step-up value of $1.1 billion accruing to the combined company, the transaction value is $10 billion. The transaction is expected to be tax free to the companies’ respective shareholders.

GE’s transportation business, which generated revenue of $4.7 billion last year, manufactures freight and passenger trains, marine diesel engines and mining equipment, among other products.

Wabtec, which has a market capitalization of $9.2 billion, manufactures equipment for locomotives, freight cars, and passenger transit vehicles.

GE’s stock has lost about half its value in the last year, and the company has been working with activist hedge fund Trian Fund Management LP, which sits on its board of directors, to turn the business around.

GE shares were up 2.1 percent at $15.30 in premarket trading, while Wabtec shares rose 1.4 percent to $96.51.

Reuters

Reporting by Rachit Vats in Bengaluru; editing by Patrick Graham

RTX5ZKLV The logo of General Electric is seen at its plant in Baden, Switzerland. Photo: REUTERS/Arnd Wiegmann